We have cloned a partial rat kidney cDNA that encodes a 72.5 kDa N terminal fragment of a third isoform of the M110 subunit of phosphatase 1. This new isoform contains an insert in the 542-597 position not present in the M110 previously cloned (Chen et al. (1994) FEBS Lett. 356, 51-55) from the same species. The encoded cDNA was expressed as a soluble GST-fusion protein in E. coli, and its ability to interact with native PP-1C was measured both in vitro and in permeabilized smooth muscle. In vitro, the fusion protein was capable of selectively binding PP-1C and increasing the substrate specificity of the phosphatase towards myosin 13.2 +/- 3.5-fold (S.E. of the mean, n = 3). In permeabilized smooth muscle pretreated with microcystin, the recombinant protein alone (1.0 microM) did not cause relaxation, but did significantly enhance the ability of PP-1C (0.3 microM) to relax the muscle. These findings show that the N terminal domain of the M110 subunit is the primary site for both PP-1C and myosin binding, and thereby determines myosin specificity. The presence of isoformic variation within this sequence may permit organ/cell specific regulation of phosphorylation sites.